Financial Services Digital trends in 2018

In 2018, Digital Transformation will move from being a tagline for the stuff you had already budgeted for, to being a strategic investment necessity. In surveys, over 80% of organisations said that “digital transformation-led innovation initiatives topped their agenda for the coming year”.

However, the understanding of what that means varies substantially between executives. Many are happy to chalk up the overhaul of their mobile UI as a major transformation win.

Transformation is about much more than this, it goes beyond replacing slow or manual processes, engaging better with your workforce, partners, suppliers and customers. It’s about considering the way the world could work, instead of optimising for the way that it does now.

Here are five key digital transformation trends that should form part of your New Years Resolutions:

1) APIs and Open Banking – Empowering customers with their data

In Financial Services in particular, it is not just customers who are demanding change, but governments too. Governments are creating and driving ‘Open Banking’ legislation to promote consumer choice, to enable them to mix and match products from different vendors. In the words of Australian Treasurer Scott Morrison “Open Banking is about giving Australians greater access to their own banking data and has the potential to transform the way in which Australians interact with the banking system”.

Customers want real-time access to their financial and insurance data anytime and anywhere. They want to use third party consolidation and analytics platforms to plan and monitor their spending, claims and other activity.

Open banking is a new form of empathic or customer-centred banking, where rather than providing a persona based view of your products, you allow the customer to build their own experience using your products and third party overlays. Ultimately, all of this evolutionary pressure is driving in the same direction, towards the API enabled bank or insurance company. Macquarie Bank is the first in Australia to have announced their OpenBanking platform (https://www.computerworld.com.au/article/627417/macquarie-launch-api-driven-open-banking-platform/) which will initially be appealing to the tech-savvy customer.

As the marketplace expands and more providers start to provide add-on services, this will become a more compelling proposition. Right now it is certainly going to drive some frantic activity from other players.

Fintechs and niche players are able to respond quickly to the opportunities that are presented by these changes as they are not encumbered by technical and process debt. Starting with a clean slate means that they can leverage new technologies or invent their own technologies which meet legislation and customer expectations. Without manual re-keying of data between systems and with singularity of vision and purpose, it is easy to create a polished product. All decisions can be made solely to delight the customer.

2) Microservices – Increasing speed to market

In order for larger institutions to move at the speed demanded by this combination of the market and legislation, organisations need to significantly rethink the way they do business and the way their systems are put together. Legacy systems put constraints in place which stifle innovation, six month release cycles prevent learning processes like A:B testing and fail fast methodologies. Existing banks and insurance companies have to decompose their applications and the organisational structure which creates and manages them.

Applications need to be broken down into loosely coupled microservices with clear documented API-based contracts in order to reduce and remove dependencies. This enables each component to be developed and deployed at its own pace. However, Conway’s law (http://www.melconway.com/Home/Conways_Law.html) dictates that in order for this technology change to manifest itself in a way which is sustainable, teams need to be created with product ownership and communication channels which mirror the digital world.

CIOs need to be the enablers of this business agility and help facilitate the business such that they can change direction quickly. IT and the business need to work as one. These digital and physical organisational changes need to happen in unison and generally require an expert third party in order to maintain course.

3) Cloud – delivering secure, repeatable services

Customer-grade digital systems need to be built on a platform which provides scalability, stability, repeatability and security. Due to industry legislation, FS&I organisations have trodden carefully when it comes to Public cloud, as such there have been varying levels of adoption.

Public cloud eases the use of automated deployment with built-in tools to programmatically create and tear down environments in a repeatable way. This, along with the appropriate source code management, continuous integration, automated testing and deployment tools forms the basis of continuous deployment. The scalability built into public cloud enables systems, once recomposed, to scale up and down based on customer demand, leveraging event and performance based triggers.

The perceptual and political blocker has really been security, but even this is better in public cloud. Not only can micro-segmentation be used to minimise the exposure from any potential exploit, but the same tools which enable continuous deployment of code can enable continuous verification of security. By codifying security hardening and the testing of this hardening, it is possible to provide the governance required. In 2018 DevSecOps will set the bold free and enable them to fully harness the power of public cloud. As with all Digital transformation, people make or break DevSecOps. Only by having Product Owners, Developers, Operations, Testers, Security, Risk and Compliance all working towards the central goal of customer enablement can you be successful.

4) Virtual Private Assistants – New ways of engaging customers

Virtual Private Assistants (VPAs) have taken over our phones, are taking over our homes and will soon make their way into our workplaces. Open banking will enable VPAs with new ways to bank and claim at home – e.g. “Alexa/Ok Google transfer $50 to John’s cheque account”. But this can be expanded to the branch with VPA’s being leveraged to provide subject matter expertise to local branch staff, or with self-service booths manned by banking bots. The ATO are already using voice imprints to identify tax payers (https://www.ato.gov.au/General/Online-services/Voice-authentication/); at last, “my voice is my passport – verify me” will be heard in branches. Insurance claims can be made and managed across multiple channels with continuity and context facilitated based on voice identification and authentication.

AI’s long term role in the workplace is to enhance the knowledge and decision making capabilities of humans. By asking the appropriate questions the AI can help guide an advisor and customer’s decision-making and product selection whilst still maintaining that human touch.

5) Crypto – preparing for the future

Whilst the industry is coming to the agreement that Bitcoin in its current guise does not have the transactional scalability of Visa or Mastercard and as such has been relegated to a low volume investment tool, time does not stand still. Blockchain will mature as a technology, with so many Initial Coin Offerings (https://www.forbes.com/sites/chancebarnett/2017/09/23/inside-the-meteoric-rise-of-icos/) leveraging different distributed transaction coherency and ledger integrity methodologies. Bitcoin’s proof of work will eventually be replaced by viable and trusted alternatives. In the short term business banking may see increased interest from their customers where those who have made investments in crypto wish to spend with retailers without double dipping transaction fees. Banking CIOs must keep a careful eye on progress as even if cryptocurrencies don’t make it into mainstream banking, the solutions that distributed ledgers provide will form the basis of at least inter-bank exchange systems.

A detailed understanding of such systems will also be required when it comes to investments and foreign exchange. With many central banks exploring the concept of a linked cryptocurrency to provide their citizens with greater flexibility. There is the potential for greater efficiency and reduced error rates.

Conclusion

All of these trends require skills and experience to provide results quickly and deliver you competitive advantage.

Bulletproof are the Cloud empowered Digital Transformation experts. We are able to assist with the move to cloud, the evolution or re-imagining of your application and retail channels, and help you to drive and manage the organisational change required to deliver sustained innovation. We leverage cloud technologies to empower our customers to disrupt their chosen markets, providing the expertise to augment your business.

We can provide Consulting, Coaching, Delivery or Support and are open to providing you with just the services you need. Why not reach out today to find out more about how we can help you.